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Monday, December 19, 2016

OVL raises $1 bn to fund Vankor acquisition

ONGC Videsh Ltd (OVL), the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), has raised US dollar 1 billion through a US dollar bonds issue to finance its acquisition of 15 per cent stake in Russia's second biggest oil field Vankor. OVL, raised USD 600 million through a 10-year bond at a coupon rate of US treasury rate plus 2.20 per cent and another USD 400 million... through a 5.5-year maturity bond at an interest rate of US treasury rate plus 1.75 per cent, he said. "It is one of the lowest cost funding rates in the current scenario," OVL Managing Director Narendra K Verma said.
The effective rate comes to 3.75 per cent for USD 600 million bond and 2.875 per cent for USD 400 million papers. The proceeds of the issue will refinance a USD 1.2 billion bridge loan the company had taken from a group of foreign banks to make payments for the USD 1.268 billion acquisition.
The loan was taken in May this year at a highly competitive rate of about 1.3 per cent. The interest rate is lower than 4.625 per cent OVL had paid on a USD 2.23 billion 10-year bond issue in July 2014 to finance its Mozambique gas field acquisition. OVL had in September last year struck a deal to buy 15 per cent in the Russia's second biggest oil field of Vankor from Rosneft for USD 1.268 billion.
Earlier, in March, the Miniratna PSU inked an initial agreement to buy an additional 11 per cent for USD 930 million. Verma said that acquisition has been funded through a bridge loan and it too would be replaced by a long-term funding in due course.
Vankor, the largest field to have been discovered and brought into production in Russia in the last 25 years, is located in the northern part of Eastern Siberia.
As of January 1, 2015, the initial recoverable reserves in the Vankor field are estimated at 476 million tonnes of oil and condensate, and 173 billion cubic meters of gas. Vankor is Russia's second largest field by production and accounts for 4 per cent of Russian output. The average daily production from the field is around 415,500 barrels per day of crude oil since acquisition and OVL's share of daily oil production from Vankor (considering both the acquisitions) will be about 108,030 barrels a day. Prior to the deal, Rosneft, Russia's national oil company, held 100 per cent stake in Vankorneft. This is the fourth biggest acquisition by OVL. It had in 2013 paid USD 4.125 billion for a 16 per cent stake in Mozambique's offshore Rovuma Area 1, which holds as much as 75 trillion cubic feet of gas reserves.
In 2009, it had bought Russia-focused Imperial Energy for USD 2.1 billion. Prior to that in 2001, it had paid USD 1.7 billion for a 20 per cent interest in the Sakhalin-1 oil and gas field off Russia's far eastern coast.